SA cities need to unclog their bureaucracy drains to let business flow

While South Africans continue to battle with rising unemployment, poverty and inequality, a World Bank report on doing business in South Africa says there is room for its cities to improve business conditions for small- and medium-sized enterprises.

The report, Doing Business in South Africa, compares the regulations and reforms for businesses of 189 economies.

The study assesses rules and procedures of doing business in Cape Town, Johannesburg, Mangaung, Tshwane, Msunduzi, Buffalo City, Nelson Mandela Bay, eThekwini and Ekurhuleni.

It assessed the time, cost and procedures of these cities based on five indicators. These include cost and time for small and medium enterprises to register a property, get an electricity connection and a construction permit, resolve a commercial dispute through the courts and transfer a title deed from one business to another.

The latest World Bank report shows that since its last report in 2015, some cities have implemented reforms and improved regulation for entrepreneurs to initiate or expand their businesses.

Johannesburg has become the fastest location in the country to register property and get an electricity connection, followed by Cape Town and eThekwini. But it still lags in approving construction permits and resolving commercial disputes, according to the report.

Cape Town is first for approving construction permits and electricity connections. Mangaung leads on the registration of property from one business to another. Msunduzi and Mangaung are the fastest in the country in contract enforcements, taking under 16 months to resolve a commercial dispute.

Speaking at the launch of the report, Deputy Finance Minister Mondli Gungubele emphasised the importance of businesses having reliable electricity supply, quality building plans and expedited transfer of property.

He added that city economies account for almost 56% of personal income tax and 57% of value-added tax, and that growth depends on investment decisions made by businesses and households. For this reason “city governments should seek to continuously improve their regulatory and administrative processes, become more competitive and facilitate economic growth”.

The report shows that although no one province performed well in all five indicators, “Cape Town, eThekwini, Msunduzi and Tshwane make the top ranks in two areas measured”, mostly in getting electricity connections and dealing with permits.

The report notes that South African cities rank fairly compared with high-income countries in obtaining construction approvals, property transfer and enforcement of contracts, but lag in reducing costs in construction fees.

“All municipalities have raised construction approval fees. In Cape Town and Buffalo City, buildingplan approval fees went up by nearly two-thirds over the past three years, exceeding the rate of inflation for the same period,” the report says.

It found South Africa’s largest port, Durban, is slow in handling goods and, overall, the cost to comply with border requirements for exports is high when compared with other economies exporting by sea.

Head of Switzerland’s Secretariat for Economic Affairs Raymund Furrer recommends South Africa learn good practice from countries such as Switzerland, where 99% of jobs are created by small and medium enterprises.

The study recommends that cities learn good practices from each other to improve their business environment.

The manager of the World Bank’s Doing Business programme, Pilar Salgado Otónel, says: “Efforts by South African locations to reduce time, cost and complexity of bureaucratic processes that can hinder private enterprises are a welcome step in the right direction.”